Dr Alex T Magaisa
THE recent decision by the Reserve Bank Zimbabwe (RBZ) and the Law Society of Zimbabwe (LSZ) to suspend legal proceedings in the dispute over money-laundering legislation is a welcome devel
opment and hopefully the beginning of a more positive approach both in the law-making process and dispute resolution. At the beginning of the year, the LSZ sued the RBZ among other parties, challenging the constitutionality of certain provisions of the Bank Use Promotion and Suppression of Money Laundering Act (2004). These provisions required lawyers, among other designated persons, to perform reporting requirements that would effectively make them investigators and prosecutors against their own clients. In a previous article in this column, I argued that important as it is to comply with international standards in efforts to curtail money laundering, legislation to that effect must not affect fundamental rights and should not negatively interfere with the professional relationship between lawyers and clients.
In this article, I argue that it is vital for the RBZ as a public regulator and policy-maker to engage in comprehensive consultative processes with key stakeholders before promoting key policies and laws. I also argue that the RBZ ought to avoid litigation as much as possible and it is vital to pursue amicable settlements with affected stakeholders so as to concentrate on its core business.
One of the critical tenets of the law-making process is that it should be done transparently and ideally those that make laws should engage in consultation with the relevant stakeholders. However, very often laws are made by the executive arm of government and introduced to the public as an expression of their “will”, having passed through parliament.
In most African countries parliament has been an ineffective law-making agent since it simply rubber-stamps laws that have been crafted by the executive. The existence of parliament only serves to fulfil a role of legitimising the will and purpose of the executive since the ruling party often commands a majority and can easily ensure that legislation sails through without much difficulty.
In the absence of debate, scrutiny and the necessary amendments by parliament, legislators often betray the will of the people who elected them into office. The end-product is not an expression of the people’s will but simply a voice of the executive.
In a situation where parliament is so ineffective, it is unsurprising that a law such as the Bank Use Promotion and Suppression of Money Laundering Act sailed swiftly through without much protest regarding its inadequacies or its threats to the rights and values of citizens and key stakeholders.
The law seeks to comply with calls by international bodies such as the Financial Action Task Force to establish minimum standards for the prohibition of money-laundering. These laws have however been created and defined not with the local Zimbabwean context in mind but to meet the interests of mainly Western countries.
The law is simply adopted without critical assessment as to whether it meets the needs and interests of concerned stakeholders within the Zimbabwean context. The LSZ therefore made a legitimate challenge against this uncritical adoption of these laws and it is useful that by agreeing to settle out of court all parties recognise the legitimacy of the challenge and also the need to have laws to curb money-laundering.
It is right therefore that the parties have now agreed to return to the drawing board to review the legislation with a view to coming up with a framework that helps to fight money-laundering but also protecting the interests of concerned stakeholders.
A critical lesson from this is that before laws are passed there must be broad consultation among stakeholders.
This is particularly the case where laws have an impact on the economic landscape and human rights.
The market is a sensitive arena and the introduction of laws without consulting key players might have negative effects on business. There is nothing wrong with engaging in a consultative process to gather the views, ideas and concerns of key stakeholders.
The process is likely to produce laws which stakeholders expect or at least have had a reasonable opportunity to participate in their making and might therefore reduce the level of unnecessary opposition and disputes which eventually spill into the courts of law. Such laws are likely to reflect the interests and needs of the local community.
In light of the cases currently before the courts, the RBZ is probably involved in more litigation than it has ever faced in a long time. There are many reasons for this upsurge in litigation. It seems to me that one of the reasons is that the laws under which it has been acting were rushed through parliament and consequently have loopholes and do not reflect the input of concerned stakeholders. Consequently, stakeholders dispute the basis upon which certain actions are being undertaken. It may also be that the RBZ itself is failing to work within the framework of its own laws.
In my view, an institution such as the RBZ should not be involved in too much litigation. It not only reflects badly on its own and the country’s image, but on the business environment as well.
Major international rating agencies do not look at such litigation favourably and consequently the competitiveness of business players may be affected. It does not reflect well on the country’s chief financial regulator and monetary policy-maker.
In addition, it will leave precedents that might in future make the work of the RBZ very difficult. The central bank of any nation is an important and revered institution which commands respect. In most countries it is highly unusual to sue the central bank and the central banks themselves endeavour to conduct themselves in ways that do not expose them to litigation.
There are also various mechanisms to resolve disputes which can be used. However, when the central bank begins to face numerous legal proceedings from all angles, it not only reflects a lack of confidence by stakeholders but also demonstrates that there is something wrong about the way it is handling things.
In my view, the RBZ should take a self-critical look at its operations and the way it has gone about handling this crisis. If there are any loopholes they can be sorted and as it has begun to do in respect of money-laundering laws, there can be reviews to ensure that the laws are properly drafted and reflect the needs of the stakeholders.
Acting arbitrarily and aggressively will only lead to disgruntlement and litigation will ultimately cause more delays in its work and attempts to resolve the crisis will face obstacles. In addition, the attention and resources of the RBZ are diverted to deal with litigation and image-cleansing instead of focussing on key policy and supervisory duties that it is by law obliged to perform.
If the agreements to suspend litigation involving Time Bank and LSZ are correct, then the RBZ is beginning to adopt the right steps. It does not need to be involved in too much litigation and must try to cultivate a respectable image. It has to demonstrate a willingness to do so by engaging stakeholders in policy and legislative making processes. And it must ensure that it abides by its own laws otherwise it will continue to face protests that will further damage its standing and the reputation of the economic system.
In conclusion, a few lessons can be learnt from this scenario. Firstly, the law-making process should be broad-based and inclusive of key stakeholders to enable the proper representation of views and interests. This is particularly important in areas that affect economic policy and fundamental rights of citizens.
Secondly, public authorities should acknowledge their mistakes when they are challenged in order to clear the way for a review of legislation and policies to reflect the interests of the affected stakeholders.
Thirdly, public authorities should endeavour to abide by the demands of the law to avoid unnecessary litigation.
The fourth lesson is that litigation is not in the interests of public authorities such as the RBZ whose respectability must be maintained at all times.
Finally, it will have been learnt that there are other better ways of resolving the current disputes without necessarily being dragged to the courts of law by disgruntled parties. In pursuing out-of-court settlements, the RBZ has begun to take the right steps and one hopes that the many cases of legal action and related threats can be dealt with in similar fashion so that the real business of economic development can begin in earnest.
*Dr Alex T Magaisa is the Baker & Mckenzielecturer in corporate law at The University of Nottingham. Contact at firstname.lastname@example.org